County's Industrial Development Authority helps groups finance goals

PETER GUINTA

Monday

Sep 28, 2009 at 9:49 AM

A steady bang of hammers, the acrid smoke and rumbles from bulldozers, blue sea framing the unfinished River House on south Marine Street -- all illustrate how industrial development bonds can stimulate growth and retain jobs.

Cathy Brown, executive director of the Council on Aging, said she needed to build a new headquarters across from her current location.

"We went to the marketplace," Brown said. "Region's Bank brought us this opportunity."

Once she secured that promise of financing, the county's quiet Industrial Development Authority approved the COA's $3.5 million bond issue at rates well below conventional financing.

There's no government guarantee or involvement. The authority only approves or denies the applications.

"We have to pay (the bonds back) over 20 years at a very fair rate," Brown said. "The blessing of the IDA was part of that process. The work pays contractors, subcontractors -- about 150 people. We're a little economic enterprise here."

To date, the IDA has approved $444 million in industrial bonds to companies and nonprofits.

These include Flagler Hospital, Glenmoor, International Golf Hall of Fame, VAW of America, Rulon Corp., Bronz-Glow Technologies and Vicar's Landing.

Charles Sands of Kosan Associates, Ormond Beach, an industrial development bond specialist, said these bonds are like municipal bonds in that the interest they receive is tax-deductible.

"The bonds can be used to finance a new manufacturing building or a renovation or expansion, and can include research and development, design and even software engineering," Sands said. "They can also (finance) low-income housing and student loans, and nonprofits may use it to refinance their debt. The stimulus package that passed in February liberalized restrictions."

Terms often require an equity requirement of 20 to 25 percent, which can be real estate. And if an existing building or business is purchased, it must continue as a manufacturing facility.

Sands spoke to bankers and others interested in economic development, working with the IDA's board of directors to encourage businesses to consider the IDA.

Board member Jim Zimmerman said, "We're just waiting to be used."

That open opportunity seemed to sit well with Lou Noir-Jones and Lane Feezor, vice presidents of First Atlantic Bank, the newest entry into St. Johns County's competitive banking market. Their new branch at Cobblestone has been open nine months.

Noir-Jones said IDA bonds are "an investment vehicle for banks, another way to make money and have interest coming in. We have (millions of dollars) in capital we'd like to deploy."

Sands said getting the bonds launched takes 90 to 120 days. Those entities that invest in bonds are usually mutual funds, large banks and equipment finance companies, he said.

"The money doesn't come from the IDA," he explained. "The authority is the conduit. The money comes from the bond market, from the lending community."

Industrial development bonds usually cost 3 to 4 percent less than conventional bonds.

Sands gave an example of A $3 million project costs $100,000 per year in interest payments. Even a tiny drop in the interest rate therefore means a big drop in interest payments over the life of the bond.

One downside, he said, is that closing costs are generally higher -- 4 to 5 percent. That's about 2 percent higher than conventional.

"But you'll make it back in lower interest," Sands said. "There are a lot of companies and financial institutions that can get together and make these deals happen."

The IDA charges one-tenth of 1 percent of each bond. For a $30 million bond, they'd get $30,000.

IDA chairman Jim Browning said interested companies could work with the county's Economic Development Council to help put deals together.

"We need to be the economic engine in this downturn," Browning said. "We don't need to be the caboose."

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